A blog on the world of responsible sourcing, featuring the viewpoints and experiences of STR Responsible Sourcing own experts and those of our friends in the corporate responsibility industry. STR Responsible Sourcing is a global provider of responsible sourcing solutions, dedicated to helping our clients build secure and socially responsible relationships with their supply chain partners.

June 21, 2012

In my January 2012 blog, Brazil’s Amazon Rainforest: Grounds for corruption and debate, I wrote about the continued reports coming out of Brazil on deforestation in the Amazon and its link to illegal charcoal camps. As a follow up, I would like to spotlight the issue of modern day slavery in the Amazon and Brazil’s recent approval of a constitutional amendment, passed last month, which strengthens the punishment for landowners and others who force people into slave labor.

Although conditions and wages for most Brazilian workers have improved over the last decade, the issue of exploitation of workers is all too common in many parts of Brazil with many poor laborers exposed to brutal working conditions across the Amazon region. Often the case, workers are lured and promised work and then placed in remote, unfamiliar areas and faced with harsh conditions they cannot escape from. With little to no pay and “debts” to pay off for their room and board, many cannot afford the journey back to home.

Last month the Brazilian Congress approved the Proposal of Constitutional Amendment Number 438 (PEC 438) to combat slave labor which is most common in remote farms but also occurs in urban sweatshops in places like Sao Paulo - South America’s largest city. Until recently, landowners who were found using slave labor would be fined but these penalties would often go unpaid- lost in the complex Brazilian legal system. However, this latest constitutional amendment allows the government to confiscate property (without compensation) and subject offenders to fines and jail terms of up to eight years. The passing of this latest constitutional amendment comes just before the Rio+20 Summit which aims to address a new set of sustainable development goals since the last meeting in 1992.

Furthermore, in 2004 the Brazilian Ministry of Labor created the “Lista Suja” (‘dirty list’) which publically exposes names of employers (persons or legal entities) caught using slave labor. The list is updated every six months and has serious financial consequences such as denial of credit from banks and other services to listed individuals and companies. According to the latest 2011 U.S. State Department Human Rights Report for Brazil, at year’s end the ‘dirty list’ contained 294 names of employers found responsible for urban and rural slavery – up from 220 at the end of 2010.

With the passing of this most recent amendment and the country’s ongoing ‘dirty list’, traceability and labor issues continue to be key topics of discussion in Brazil and will continue to do so given the Rio+20 conference taking place there this month. Brands in particular will want to ensure their labor force in their supply chain complies with local labor laws and company standards. For more information on training services offered by UL RS surrounding the issue of slavery and human trafficking, please contact Susan Gebauer at Susanne.Gebauer@ul.com.

June 07, 2012

The U.S. State Department has recently released a fundamental source of information for the CSR industry: the 2011 Human Rights Practices Reports. The reports cover over 190 countries and are updated annually with meaningful rights-related events. Such events are a critical means for CSR practitioners, companies, academics, and governments to better understand human rights conditions at the country and regional levels.

As stated by the reports, the 2011 citizen uprisings that took place in the Middle East and North Africa “…have sent aftershocks rumbling around the world…demanding citizens’ universal rights, dignity, greater economic opportunity, and participation.” Considering these events and demands can offer important insight to a country’s advancement on promoting respect for human rights.

This year’s reports document an unfortunate range of negative developments in overall human rights conditions. Although most of the negative backlash is related to political and religious freedom rights, there are also important reverses in the advancement of labor rights. Challenges are particularly related to freedom of association and collective bargaining, prohibition of forced labor, and prohibition of child labor and minimum age of employment.

Overall, national laws grant the right to form and join unions but registering a union has been highly restricted in practice and a considerable number of workers have been illegally penalized for joining unions worldwide. Likewise, unions are generally allowed to bargain collectively but this right was rarely practiced. In the case of compulsory work, although most countries prohibit forced or bonded labor, penalties were not sufficiently stringent to deter the offense—which affected particularly women and children—while governments did not seem to effectively enforce the prohibitions.

As for child labor, the reports indicate that even though minimum age and employment of children in certain hazardous sectors is generally regulated in most countries, child labor under the legally allowed age and in dangerous sectors is still widespread. Even though ministries of labor have the duty of inspecting worksites to enforce child labor laws, the events documented during 2011 suggest that inspections only took place after complaints were brought by workers, teachers, the media, or NGOs, and that penalties were rarely imposed.

These issues are critical to CSR practices and to accurately assess risks present along the entire supply chain. In order to advise clients on countries, regions, industries, and suppliers, UL RS products and services are heavily informed by these country reports. In conjunction with the UL RS extensive audit database and regional expertise, these reports allow UL RS to produce a wide range of comparisons and trend analyses related to CSR performance within and across countries.

For instance, UL RS has been producing since 2005 its Country Risk Index by combining the country level information provided in the Human Rights reports and the UL RS country audit grades. This index ranks over 180 countries according to social, economic, and political factors—both on the country and factory levels—in order to advise sourcing decisions, supplier segmentation, and allocation of audit resources. These country reports, together with the expertise of staff located on the ground, are also used to develop the UL RS Country Risk Profiles, which provide an overall picture of the most significant human rights violations for a specific country.

UL RS therefore recommends using these reports as means for surveying supply chain programs and targeting identified issues. They will allow CSR practitioners to have a more comprehensive understanding of human rights conditions at the country level and their potential risks, and thus to design strategies that better address these issues.

May 22, 2012

Are your suppliers located in the water scarce and polluted areas in China? Are you concerned about the water stress may impact your suppliers’ operations and supply chains? Are you concerned that water issues in your supply chain in China may directly or indirectly affect your company’s reputation? Do you have a business strategy and management plan in place to address the emerging water crisis in China?

The availability of water has become an emergent issue in China; it is estimated that 11 provinces in China could run out of water by 2030 (source: www.chinawaterrisk.org). The 11 dry regions (Gansu, Jiangsu, Liaoning, Henan, Shandong, Shanxi, Shanghai, Hebei, Ningxia, Tianjin and Beijing) are facing the challenge of not only a water crisis but also water pollution. Water use is a fundamental component in manufacturing of all products; industrial activities within the electronics, textile, mining, agriculture and food processing industries comprise 23% of all water use in China. Additionally, it is estimated that 52% of China’s manufacturing activities take place in the aforementioned water scarce areas (www.chinawaterrisk.org).

In addition to water scarcity, water quality is also deteriorating in China. According to the Ministry of Environmental Protection (MEP), 35% of key lakes and reservoirs in the country are considered “useless”, and are only fit for industrial or farm irrigation purposes. Another staggering fact provided by the MEP is that 77% of China’s key lakes and reservoirs are not fit for human contact and do not meet the standards for fish farming and municipal use.

On the monitoring and enforcement side of water management the situation looks equally bleak. It is alarming that of the 6,000 environmental violations of Chinese textile enterprises had been recorded in the China Water Pollution Map, a database launched by the IPEA in 2006. Only a few of the perpetrators were given administrative penalties. Many were told to rectify problems by breaching other standards; for example, discharging illegal effluent emissions via secret discharge pipes or directly pumping waste water into waterways.

So how is the Chinese Government responding to the water crisis? According to the country's 12th Five-Year Plan it intends to increase water efficiency and reduce the water use per unit of GDP. The country has also planned to hold local officials accountable for all green development. Consumers from the West and international NGOs are putting more pressure on global companies and their factories to clean up their waste streams and use less water. Likewise, some companies have started to engage with polluting factories in their supply chains.

According to the statistics from the World Bank, Chinese industries use four to 10 times more water per unit of production than industries in other industrialized countries. This shows that there is room for improvement in both production efficiency and pollution control. UL RS can help companies improve the environmental performance of manufacturing facilities, by examining and analyzing the gap; developing management systems that address responsible water use; water efficiency, water footprints, wastewater treatment and other areas of potential risk.

April 17, 2012

Data supplied was inaccurate and a correction has been made. The corrected information is highlighted.

UL Responsible Sourcing Inc. makes every effort to ensure the accuracy of the information that it provides and apologizes for any inconvenience this may have caused.

Meal and rest breaks have been particularly difficult for California employers to comply with in the last decade. The many treatments of the issue by various courts have complicated interpretation of the state's requirements and resulted in a large number of lawsuits. However, the highest court in the state, the Supreme Court, put the issue to rest on Thursday, April 12, 2012. Now California employers have resolution on three key issues:

1. Employers must provide, but do not have to require, that employees take a minimum of 30 minutes for a meal break;

2. Meal breaks are required to be taken before the sixth hour of work commences, and, in the case of employees who in a given day work at least 10 hours, a second meal break should be taken before the 11th hour of work commences; and

3. Ten minutes of rest must be permitted for every four hours of work or major fraction thereof.

The most important part of the Supreme Court's decision is that employers do not have to ensure that meal breaks are taken; they only have to provide meal breaks. Thus, if an employee is presented with the option to take a 30 minute meal break, it is permissible for an employee to work through it of their own accord. A best practice is for employers to maintain a specific policy for meal breaks, including the timing of meal breaks. The policy should include the following components:

1. Meal breaks should be provided for employees working more than six hours, and for employees working less than six hours who choose not to waive their meal break;

2. If an employee works six or less hours in a day, the employee can waive their meal break;

3. Employees should be scheduled to take a meal break after no more than five hours of work, and a second meal period after no more than 10 hours of work.

UL RS recommends that companies reach out to California vendors and suppliers and require them to commit to complying with the proper interpretation of the Supreme Court decision. Sending over a comprehensive and easily understandable reading of the law, as well as a set of frequently asked questions and answers in response to the ruling is advisable.

April 13, 2012

In March, Bloomberg reported that according to estimates by the All-China Federation of Trade Unions, “[o]f China’s more than 300 million urban employees, an estimated one-fifth—or 60 million—are labor dispatch workers.” Surprisingly, this represents a doubling in figures since the introduction of the Labor Contract Law in 2008 – a law mandating dispatched employees be given the same benefits as regular employees and requiring the employer to bear liability if the dispatched employee’s rights are violated.

Dispatched employees are persons hired through an employment service agency, who later work at different companies or locations. Originally, the use of dispatched employees was to avoid employer liability and save labor costs, such as social insurance benefits and other benefits provided to regular employees. The Labor Contract Law intended to close this legislation gap, but without success.

In reality, the law does not bring much effective protection to dispatched employees. They now rather serve as temporary employees – under legitimate terms – so production needs during peak seasons can be met. Even though these employees sign labor contracts with the labor dispatch agencies, the law does not mandate a fixed period of service in certain receiving companies. Thus, stable employment is not guaranteed, and workers lose their sense of belonging and perhaps even their sense of loyalty. Given such “temporary” status, the dispatched employees are easily “returned” to labor dispatch agencies receiving no severance compensation.

It is also common to see that dispatched workers are often paid less than regular workers for doing the same work, not to mention the lack of an employee welfare package, such as annual and sick leave. As a result, many dispatched workers feel inferior.

The guiding opinion of Shanghai also requires the registration of labor dispatch agencies operating in Shanghai and its use of dispatched employees so as to better monitor the dispatch practice. Following Shanghai, Guangdong province drafted similar Administrative Regulations on Labor Dispatch and is soliciting the public opinion. Nonetheless, other regions with high dispatched worker numbers such as Fujian, Henan, and Anhui, have not taken further actions to streamline the labor dispatch industry through regional legislation.

More attention needs to be paid to the use of labor dispatch in supply chains and the better protection of dispatched employees’ rights. At a minimum, detailed guidance and trainings for suppliers on the sustainable use of dispatched employees should be provided.

April 11, 2012

Cambodia is one of the countries with the lowest minimum wages in the world. Although the Cambodian Labor Code does not specify intervals for revision of minimum wage rates, in practice the minimum wage for the garment industry has been updated every three or four years. As it stands, regular Cambodian workers receive around USD 61/month, whereas probationary workers receive USD 56/month, which will be valid until 2014. The government believes that this amount is sufficient for workers to have a decent life.

However, despite the fact that the garment industry in Cambodia represents 90% off all exports, under the current wage rates a quarter of the population is still living below poverty line. Additionally, mass fainting incidents have become very common across the nation, which the government claims are related to health and safety issues and a high workload. On the other hand, unions point to low wages as mostly the root cause of the incidents, often leading workers to conduct excessive overtime to make ends meet. Naturally, long-hours of work, lack of rest and malnutrition make workers even more fragile, yet being sick is not an option because this might mean the loss of one’s attendance allowance.

Strikes and events have been held to raise concern and awareness about the situation of workers in the Cambodian garment industry. Based on social audits conducted by UL RS in Cambodia during 2011-2012, excessive overtime hours and lack of seventh-day rest are the top violations noted - this would indicate a correlation with the situation claimed by union above.

Furthermore, occupational health and safety violations also play a significant role in impacting workers’ health conditions. A number of global brands have been taking part in addressing this issue, such as Adidas, Puma, H&M and Gap and have expressed their concern related to workers’ labor conditions in garment factories. H&M plans to carry out some research into the ‘fair wage concept’ approaches, while Adidas believes that wages in their own supply chain should meet basic needs and also provide for reasonable savings and expenditure. With an increase in consumer awareness and responsible sourcing, international clothing brands are pressed to invest in and improve garment workers’ working conditions in Cambodia.

In the meantime, the Garment Manufacturers Association in Cambodia (GMAC) has stated that there should be no discussions on raising the minimum wage until 2014 while three workers unions continue to press the government to do so. As it stands, the government has not issued any response to the latest living wage demand – which many consider a state duty. The UL RS team will keep a close eye on any developments in this area.

April 06, 2012

Migratory Latin American workers are overcoming obstacles in their traditional paths and forcefully establishing news ones. As the “emerging” Latin American economies rapidly recover from the 2008 economic crisis, the migrants that are arriving in these countries are gradually reshaping the region and challenging host countries to examine their labor migration laws. Recent migration trends would indicate that migrants are keen to move to areas closer to their homes and their families, and with improvements in technology and infrastructure, the discovery of new places is made easier and a lot less perilous that the journey to the USA. As a result, many countries in Latin America are now facing rising concerns about protections for migrant labor – an issue the US and the European Union have struggled to address for years.

In countries like Mexico, the dangers and cost for labor migrants (often crossing illegally) have become more challenging and dangerous amid the drug cartel violence plaguing border towns and crossings, along with increased border security. For the US this means fewer migrants crossing the border illegally, but for Mexico the impact has been more noticeable as described in a recent New York Times piece. Sleepy villages that once stood tranquil are now seeing an influx of workers looking to rural cities and other countries in the region to plant their roots and make their fortunes. Experts say more Guatemalans are also settling in Mexico after years of passing through on the journey north.

Similarly, labor opportunities are also attracting migrant workers further south and signaling a reversal in immigration flows. With current investments in the Amazon fuelling a demand for labor, Haitians, Peruvians, Bolivians, and even migrants from as far away as Bangladesh are betting on Brazil for better opportunities. As a consequence, the developing countries that play host to migrants are being forced to reevaluate their immigration and labor policies.

As reported in February in another New York Times article, 4,000 Haitians made their way across the Americas in January 2012 to remote outposts of the Amazon in search of work. Unfortunately for these migrants, they arrived just as Brazil began limiting the number of temporary work visas to Haitians as a means of curbing Haitian immigration. Consequently, many were barred from securing legal work in Brazil and, in some cases, ended up working in illegal gold minds in the Peruvian Amazon where they were often robbed of their money and passports. “They’re easy prey for the bands of human traffickers” says Ricardo Valdés, director of CHS Alternativo, a Peruvian human rights group. In the meantime, hundreds of Haitians in Peru continue to find themselves in limbo as the status of Haitian nationals in Brazil remains ambiguous.

Clearly, labor migration flows within Latin America are shifting and are likely to continue to do so. The question now lies on how countries in the region and others south of the globe will be able to effectively incorporate and implement provisions of international labor standards and constructive labor migration policies to help integrate and protect intraregional migrant workers.

April 02, 2012

In my November 2011 blog, Wired Reputations: the US DOL's New Form of Pressure on Brands, I wrote about how the US DOL has harnessed digital media to directly contact workers and consumers in order to further the awareness of their rights. As a follow up, I would like to turn your attention to the flipside, that is, how the DOL reaches out to employers, specifically to alert them to the number of resources available to help employers understand how to properly classify employees vs. independent contractors. This is of tantamount importance, as the DOL continues to place an increasing amount of importance on targeting improper classification and has dedicated an expanded portion of its 2013 budget to this specific enforcement target. These points were explained in more detail during a live Q&A session hosted by a number of members of the DOL, including Labor Secretary Hilda L. Solis, on Monday February 13, 2012 (the transcript may be found here).

The session revealed that the targeting of the misclassification of employees as either independent or overtime-exempt will receive continued and increased focus as part of the Wage and Hour Division's (WHD) Misclassification Initiative. It mentioned the September 2011 signing of the Memorandum of Understanding between the DOL and the IRS, which will coordinate the agencies' efforts to strengthen enforcement. The WHD's website was mentioned as a jumping-off point for additional resources and has links to 13 state websites that explain how each state will participate in the Misclassification Initiative. Other resources found on the page include a CBS News segment on the issue, which may be viewed here.

According to Nancy Leppink, a representative from the WHD, because enforcement related to misclassification of employees as independent contractors and overtime-exempt employees has been particularly successful, the department is expanding the budget available for this type of activity and using it to hire 35 full-time employees and increase education efforts for employers and employees about their rights and responsibilities. The DOL will continue to focus on low-wage industries that employ vulnerable workers, including agriculture and garment. This is more severe in California where Senate Bill 459, signed into effect on January 1, 2012, increased penalties to employers who are found to have willfully misclassified their employees as independent contractors.

With such attention being paid to the issue, brands would be wise to expend an increased amount of resources on ensuring that their supply chain complies with classification laws. For more information on US federal and state law, check out UL RS' Labor and Employment Standards Library website. For more information on training services, check out UL RS' Training and Education website. For more information on remediation services, check out UL RS' Collaboration and Continuous Improvement website.

April 01, 2012

Readers of this blog have likely known about the working conditions at Foxconn for some time. For the American general public, on the other hand, it was not until the turn of 2012 that an unhappy confluence of events brought Foxconn, and with it the concept of CSR, into the mainstream. With the Foxconn story’s movement from the fringe of the media to the center, the concept of CSR has entered into the American zeitgeist. Now, more than ever, consumers are beginning to understand the geographical origin of their products, the working conditions of the people involving in production, and the principle of supply chain management.

The public is now relatively aware of Foxconn due to a number of entertainment outlets that have not traditionally covered CSR but have featured the factory as a topic, such as the theater production starring Mike Daisey entitled The Agony and Ecstasy of Steve Jobs that began running at the New York Public Theater at the end of January 2012. Soon after the play's premier, the public radio show This American Life adapted it into a one-hour episode, which has become the most popular episode in the show’s now 16 year history. The Daily Show with Jon Stewart picked up the thread by featuring a segment on the factory. Now, following in the new pattern of social media, nearly every media platform is covering the factory, with regular updates on developments featured by the Times and on CNN.

The impact of the story is hard to pin down. Will the sole fact that the story has entered the mainstream media be an impetus to encourage the CSR activities of American corporations or will Apple be the only corporation named since it has the highest profile? Will there be follow through, or will Apple be able to turn the story into a PR coup and gracefully exit from the dialogue on worker suffering at the Foxconn plant? One thing is for certain; Apple’s brand has not taken a hit in the form of reduced sales, as its shares have risen to their historical peak and iPads continue to be bought at historic highs. Immediately, this seems to refute the theory that negative brand publicity will result in lowered sales. Yet, Apple is an exception to this rule because of its particularly strong brand recognition and customer loyalty, as opposed to a company like BP, which lost share value in the aftermath of the gulf oil spill.

Ultimately, as the surge in media attention surrounding Foxconn has not been enough to affect Apple’s sales, the mainstreaming of CSR in America will not fully take place without expanded and sustained media coverage. It is not difficult to imagine the next step in this process, where attention shifts from the problems at Foxconn to how Apple is attempting to remedy them. Already the media has begun describing propositions long held within CSR circles, such as offsetting excessive overtime hours by hiring more employees. This is exactly the type of information that the public must understand in order to truly engage CSR in the mainstream and include CSR as a value in the decision of whether to buy a product.

March 29, 2012

In a country like Pakistan where the top leadership is in constant fear of a possible coup or gripped by infighting, it doesn’t come as a surprise that problems afflicting millions of workers remain unaddressed. The 18th amendment to the Constitution two years back was anticipated to be a progressive move in improving the condition of the workers but it remains caught in teething troubles.

The major amendment to the Constitution placed the power to deal with labour matters into the hands of provincial governments, with the intent of dealing more effectively with issues related to worker rights. Sadly, the majority of provinces have failed to legislate on more than 130 labour subjects which now come under their direct administration. Punjab appears to be the only province which has started legislating on some labour subjects like industrial employment, maternity and bonded labor.

Further, the Constitutional amendment has created some lacunas as well. With provinces being vested with the power to make laws on trade unions, the national level regulatory body for registration of trade unions was dissolved. This resulted in national level unions and federations remaining without any legal protection. Absence of a federal law to govern national level unions results in non-conformity with ILO Convention 87 and Article 17 (1) of the Pakistan Constitution.

Another challenge created by the amendment is that provinces are finding it difficult to handle the transference of Employees Old-Age Benefit Institution (EOBI) and Workers Welfare Fund (WWF) because of lack of capacity. Also, it remains unclear how the provinces will handle pension funds when the retired workers return from other provinces where they registered in the first place.

Thousands of workers continuing without legal protection due to lack of appropriate provincial laws poses another problem. Home-workers are just one of the categories of workers who remain without any legal coverage. It is estimated approximately 8.5 million home-based workers exist in the country of which 65 percent are women. Beginning of this month, the Punjab government declared that it will grant protection to home-based workers through the Punjab Home-Based Workers Act, 2012, which will be passed soon. It remains to be seen when the legislation is finally enacted. Other provinces have yet to address the vulnerabilities of home workers.

For the constitutional reforms to succeed, provinces will have to urgently legislate on all matters devolved to them. Finally, the federal government has admitted it will bring in more amendments to address all anomalies which have risen due to the changes made.